Hat tip to daytrip for sending in this article from Reuters about the alleged appraisal problems.  These people need to buck up and get a life – low appraisals are the realtors fault for not supplying enough good comps to justify the price:

When Sean McGowan signed a contract to buy a New Jersey home in November, he didn’t expect he’d still be living with his parents nearly a year later.

The deal fell through after two appraisals came in tens of thousands of dollars below the contract price, part of a wider trend of differences over property valuations that is compounding the U.S. housing crisis.

“It was very frustrating. We really wanted to move in,” said McGowan, a 31-year-old real estate lawyer.

Many housing experts say low appraisals are yet another headwind for a housing market already suffering from a plunge in prices, high unemployment and tight credit.

Lenders are forced to cap their mortgage loans at the value set by appraisers and buyers and sellers often can’t agree on how to make up the difference with an original deal price.

“It’s hard to talk about any recovery of the housing market and home prices until the appraisal issue is squared away, and that is a broad issue,” said Guy Cecala, publisher of Inside Mortgage Finance, a Maryland-based trade publication.

Sixteen percent of Realtors reported contract cancellations in July, matching June’s level, which was the highest since March 2010, when the National Association of Realtors began collecting data.

Nine percent reported contract delays due to low appraisals, and 13 percent reported a contract was renegotiated to a lower price because an appraisal came in below the original price in the last three months, the NAR said.

Appraisers in the United States have long been used to controversy for their role in the country’s housing market.

The appraisal system has been reformed in recent years to put a stop to the high estimates of property values that even appraisers admit helped inflate the housing bubble.

Many industry watchers argue the new regime has caused the pendulum to swing too far to the other side, inadvertently causing the opposite problem: artificially low appraisals.

“The industry, both from a lending perspective and appraising perspective, has gotten as outrageously conservative now as they were outrageously aggressive a few years ago,” said Rick Sharga, senior vice president of data firm RealtyTrac.

Mortgage finance agencies Freddie Mac and Fannie Mae have barred brokers and Realtors from any role in selecting appraisers since 2009. The Federal Housing Authority, which plays a key role in the U.S. housing market by insuring loans for low- and middle-income Americans, adopted a similar ban.

The three agencies together owned or insured around 90 percent of mortgages issued in the first half of the year.

As a result, 300 to 400 appraisal management companies (AMCs) have sprung up, mostly since 2009, to act as intermediaries between appraisers and lenders, according to the Appraisal Institute, an industry association.

AMCs hire contractors to provide 70 percent of residential appraisals, while the appraising arm of banks perform the rest, according to the same group.

Realtors and mortgage brokers, upset that their deals are often stymied by low valuations, say AMCs are to blame in large part for the conservative estimates. Some appraisers also resent the loss of high fees they used to receive.

“They are hiring these young guys and it’s all based on price and not expertise,” said Mike Evans, an appraiser and former president of the American Society of Appraisers, a trade organization.

“Some guy blows in from 300 miles away and grabs three comps that may not be in the right area, and leaves,” he said, using the industry jargon for comparable sales that are used to evaluate a property’s value.

“Because they don’t want the scrutiny, they don’t want to seem like they are going high, they just grab the three lowest sales” as comparables, said David Demuro, a residential appraiser in Florida.

Dennis Blanton, a Coldwell Banker realtor in Myrtle Beach, South Carolina had a buyer agree to purchase a vacation home for $77,500, before the appraisal came in at $50,000.

“It takes the wind out of the sails of the buyer,” said Blanton. He noted the appraiser used short sales — whereby home-owners are forced to sell a home often at discounts of around 20 percent discount to normal sales — for comparison. His buyer is no longer looking for homes in the area.

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